Rap Coalition

A HOW-TO RESOURCE FOR RAP ARTISTS, PRODUCERS, & DJs. Since knowledge is power, here is your best defense to succeed in the urban music industry...

Saturday, June 23, 2007

The Storm Is Coming ... And It Has Nothing To Do With Global Warming

"The CD is dying at a rate that is predictable at this point. It will someday level off into a niche market the way vinyl has. In five years, it will be of very little consequence. The problem is there is no physical medium to replace it. It's digital, but digital is in its infancy."
-- Larry Kenswil, executive vice president of business strategy for Universal Music. (As quoted in the article, "Does digital file sharing render copyright obsolete?" -- see link below.).
Well, I'm glad another label executive has come out and admitted the obvious. But since the CD "is dying at a rate that is predictable at this point," it immediately brings about several questions.

1. If the labels all know this, why haven't they dropped prices on CDs even more? This should be done as soon as possible to extend whatever shelf life is left for physical disc sales. Profits would still be more than those generated by online sales of music at iTunes and elsewhere, and lower prices might even increase disc sales of hot product and possibly good catalog titles. Online sales of digital music make current CD pricing inane and if prices aren't lowered, CD sales will decline even faster.

2. If the labels all know this, why aren't they trying to offer more "bang for the buck" by introducing something like more Dual-Disc/DVD titles into the marketplace that could open up another ancillary revenue stream beyond the CD? The Dual-Disc is a format that would allow labels to package great video content with great albums, and in doing could possibly provide even greater profits than music DVDs being sold separately. Imagine the marketing possibilities, and, at this point, what is there to lose by trying this? Not a thing. Oh sure, there are label suits who say the cost of making such packages won't be justified in the end because sales won't reach levels needed to make these profitable. But why not try it first with some great classic album titles and video content and see what happens. When consumers know what they want, and they want it badly enough, they somehow always find a way to get it. They've bought special box-sets, enhanced audio CDs of great albums, and special edition titles as well.

3. If the labels all know this, where is the innovation needed for the industry to successfully move from one business model to another as online digital sales of music increase? If indeed, there are strategies being drawn up in smoke-filled rooms somewhere at any labels, nobody anywhere is talking about them. The ONLY innovative ideas we read about are coming from technology companies like Apple, Microsoft, et al. Why aren't any labels working to create symbiotic relationships with tech companies? (And again, if they are, let's hear about it.) Yes, technology companies must innovate to survive, but is there any doubt now that all entertainment\content companies must do so as well?

4. While it's true that CD sales are declining fast, there are audiophiles and others who will always want to own CDs. This market can be exploited with great growth possibilities if labels utilize customer retention methodologies already in place in so many other industries. Reward programs that offer points towards future purchases (online or off) will generate not only more retention, but they can also generate a great database for individual labels that they can utilize to communicate directly with their consumers. As Sam Walton said, "There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else." With all the entertainment options out there, it's more than high time to for the industry to create more customer loyalty.

Once CD sales do get to a level "of very little consequence" the industry will possibly find itself like the crew aboard the Andrea Gail. Headed into "The Perfect Storm."

A tidal wave of digital music sales that don't offer the same profit margins and a whirlpool sucking away physical CD sales. How to stay afloat during this time will be the industry's greatest test.


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AND NOW THIS
This week Justin Timberlake signed YouTube.com sensation from Holland, Esmee Denters, as the first artist to his newly formed Tennman Records. The 18-year-old Denters is one of the most notable singers-songwriters to gain attention strictly as an Internet performer and with a soulful voice beyond her years, she quickly became a YouTube celebrity.
Here's the big reason why Esmee is a YouTube hottie. She has allegedly received over 21 million views since posting his first performance on YouTube a little over eight months ago. 21 million!

Try and relate how 21 million views compares to a #1 record that gets 8,000 to 9,000+ spins a week (while it's red hot) at radio here, and you can see quite easily that radio is not the primary media of choice for active music people who are potential consumers looking for new music by new artists.

If only five percent of the people who have been potentially exposed to Esmee's videos (I say potentially because repeated views by people add into the total view number tally) buy her music, she has a potential platinum level album upon release. If only two-and-a-half percent buy her debut release, she's gold out-of-the-box.

Yet another case of artist development 2007 style by an artist that did it on her own.

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